Posts Tagged ‘manipulation’

Why Nobody Trades During Regular Hours Any More (And How Prop Funds Just Stop Trading When Volatility Spikes)

Why Nobody Trades During Regular Hours Any More (And How Prop Funds Just Stop Trading When Volatility Spikes)

HFTCourtesy of Tyler Durden at Zero Hedge 

For those who follow our periodic updates on intraday stock volume, today’s article by the Wall Street Journal which focuses on the dramatic decline in activity during regular working hours will come as no surprise. In a piece looking at prop trading shop Briargate (oh so witty anagram of arbitrage), founded by several former NYSE specialists, we learn that at least one firm (and likely many more) now no longer does any trading during the hours of 11 to 2. As this creates a feedback loop of inactivity, pretty soon the core of daily stock market activity will merely be the half an hour of action at the open, and the dark pool-ETF-open exchange rebalance at the very close, with everything inbetween deemed obsolete.

Of course, what this will do, is create even more volatility in trading, force an even greater decline in stock trading volumes (and pain for Wall Street firms), and a further divergence between stocks and fundamentals, as momentum trading gains an even more prominent role in determine "price discovery."

From the WSJ:

On the day the "flash crash" bludgeoned the stock market and chaos swept over the floor of the New York Stock Exchange, the founders of Briargate Trading were at the movies.

Rick Oscher and Steven Rubinstein weren’t playing hooky. Briargate, a proprietary-trading firm that the two former NYSE floor "specialist" traders started in 2008, is mostly active at the stock market’s open and close.

In between, when market activity typically drops, the Wall Street veterans play tennis in Central Park, take leisurely lunches, visit their children’s schools and work out at the gym. Dress shoes have been replaced with flip-flops, slacks with cargo shorts. Once during market hours, they walked about five miles and crossed the Brooklyn Bridge to try Grimaldi’s pizza.

"We actually planned on working a full day," says Mr. Oscher, wearing a white polo shirt and blue-plaid shorts. "But from 11 to 2, the markets are pretty quiet—what’s the point? As a specialist, you have to stand in your spot all day and we did that for 20 years."

Briargate—an anagram of "arbitrage"—isn’t the only firm taking an extended recess during the 6½-hour U.S. trading day. Trading has become increasingly concentrated in the


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Non Farm Payrolls: The Devil Is In the Adjustments

Non Farm Payrolls: The Devil Is In the Adjustments

Courtesy of JESSE’S CAFÉ AMÉRICAIN

When the US government announced a ‘better than expected’ headline growth number in its non farm payrolls report for August, a loss of ‘only’ 54,000 jobs versus a forecasted loss of 120,000 jobs, people had to wonder, ‘How do they do it? We do not see any of this growth and recovery in our day to day activity.’

Here’s one way that those reporting the numbers can ‘tinker’ with them to produce the desired results.

As you may recall, there is often a very large difference between the raw, unadjusted payroll number and the adjusted number. Seasonality plays the largest role, although there can occasionally be special circumstances. Since this is designed to be a simple example I am going to lump all the various adjustments that could be and call them the ‘seasonality factor’ since it is most usual and signficant.

Here is a chart showing the unadjusted and the adjusted numbers. As you can see, a seasonal adjustment can legitimately normalize the numbers for the use of planners and forecasters. This is a common function in businesses affected by seasonal changes. Year over year growth rates, rather than linear, comparisons, can also serve a similar function.

Quite a variance in numbers that are very large.

Since it probably is in the back of your mind, let’s address the infamous "Birth Deal Model" now, which I have advised may not be such a significant factor as you might imagine. This is an ‘estimate’ of new jobs created by small businesses. A comparison of the last few years demonstrates rather easily that this number is what is called ‘a plug.’

How can the growth of jobs from small business not been significantly impacted by one of the greatest financial collapses in modern economic history?

Certainly the Birth Death model offers room for statistical mischief. It is important to remember that it is added to the RAW number before seasonal adjustment, and that number has huge variances. So the effect of Birth Death is mitigated by the adjustment for seasonality. If it were added to the Seasonal number from which ‘headline growth’ is derived it would be a huge factor. But it is not the case, although the timing of the significant annual adjustments and additions is highly cynical, and supportive of number inflation.…
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SP Futures and Gold Daily Charts at 2:30 PM EDT: Smoke and Mirrors

SP Futures and Gold Daily Charts at 2:30 PM EDT: Smoke and Mirrors

Courtesy of JESSE’S CAFÉ AMÉRICAIN

The spike in the overnight futures based on the vague assurances from China to revalue the yuan higher, a strictly political move to pre-empt the discussion at the upcoming G20 meeting, was a way to justify a classic ‘wash and rinse’ in the price, and bring in some coin for the needy Wall Street banks.

This is the method by which the moral hazard of bailing out the Too Big Banks has provoked the unintended consequence of strangling the economy and the very markets which the bailouts were intended to save (at least on the storyboard). They are unable to make their expected outsized returns using conventional business means, so they must resort to soft control frauds, generating market inefficiencies to support their unsustainable existance. They ought to have been broken up and liquidated where necessary. 

As I suggested last night, the spike higher was utterly artificial, and worth fading to the short side. But while it stays above the trendline now around 1110 I would not lean on it too hard, since the threat of a snapback rally in the last hour is always there on these thin volumes. If it breaks down, we are probably heading down to the 1060 support in a roundabout way.

There is also an FOMC rate decision coming up on the 23rd, Wednesday, so we will see some artificial action around that. It is also the day that GTU closes its shelf offering which should take some of the pressure off the unit price.

As a reminder this is the option expiration week (June 24th) for gold and silver July contracts at the COMEX. Even so, the pullback in the price of gold is well within the range of the handle. Short term it is relatively easy to manipulate the price within a certain range of the primary trend, given the current state of regulatory capture at the CFTC. At some point the primary trend will take a much steeper slope as we head towards a commercial failure to deliver. But no one can accuse the people in New York and Washington of long term thinking when there are short term profits to be made, and campaign contributions to be pocketed.


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Stocks Freak Out Again: 130 Point Move In Dow In 15 Minutes On No Volume

Stocks Freak Out Again: 130 Point Move In Dow In 15 Minutes On No Volume

Courtesy of Tyler Durden

Once again, we get to see just how broken our stock market is, one which takes no prisoners, and will trample over everyone and everything as the Primary Dealers use your own money against you to shake every single person out. A 130 point move in the Dow in the matter of minutes on no volume is about all you need to know to lose all confidence in stocks, and call up TD Ameritrade and close your account (you won’t be allowed to trade when the market is crashing anyway). Good thing we had a fake rumor in the morning to prevent an all out rout into Friday with the Dow looking to open well into 9000. Additionally, with credit not moving, and obviously not buying this move, there is nobody left who can claim the market is anything even remotely resembling orderly, efficient or fair. SkyNet is again rising.

 


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Manipulating Gold and Silver: A Criminal Naked Short Position that Could Wreck the Economy

Manipulating Gold and Silver: A Criminal Naked Short Position that Could Wreck the Economy

Courtesy of Mark Mitchell at Deep Capture 

Close-up of traditional puppets, Boston, Massachusetts, USA

Everyone from U.S. Senators to prominent hedge fund managers say that criminal naked short sellers had a hand in the financial collapse of 2008, but the regulators aren’t listening. Not a single criminal has been prosecuted. Indeed, the regulators continue to allow the miscreants to manipulate the markets — not just the stock markets, but also the markets for corporate bonds, derivatives, U.S. Treasuries, and all manner of commodities – even when the regulators are provided with indisputable evidence of a massive crime in progress. They could easily fix the flaws in the settlement system that allow much of the manipulation to occur, but they refrain from doing so either because they are too captured by the miscreants or too cowed by the possible consequences of throwing the lights on what may be an enormous confidence game.

So I am inclined to say that it is hopeless. Everyone loves an optimist – but, yes, it is hopeless. We are like the audience in one of those cheesy horror flicks – yell and scream all you like, but the dumb blonde is still going to walk into that room and get hacked to pieces. Except that it is not a movie. It is real. And it’s not just the dumb blonde who is going to get slaughtered. It is all of us. It is our economy. It is our standard of living. It is our financial system – the lifeblood of the nation.

The latest case of regulatory indolence was recently exposed by Andrew Maguire, a successful metals trader and whistleblower who went to the Commodity Futures Trading Commission with data that strongly suggested that a small number of criminal short sellers had rigged the markets for silver and gold. Maguire not only provided the regulators with a Dummies’ guide to how the manipulation generally worked, but also warned them of a specific crime – a dramatic take-down of the gold and silver markets – that he said would occur at an exact time on a specific date in the near future. That is, Maguire told the regulators that a massive crime was about to happen, and the crime happened precisely as he predicted it would.

With Maguire’s warning, the regulators…
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Silver Short Squeeze Could Be Imminent

Interesting press release from the National Inflation Association about Silver price manipulation. 

Silver Short Squeeze Could Be Imminent

Close-up of Indian silver coins

FORT LEE, N.J., April 3 /PRNewswire/ — The National Inflation Association today issued a silver update to its http://inflation.us/ members:

On December 11th, 2009 NIA declared silver the best investment for the next decade. In our December 11th article, we said that it wasn’t a coincidence that the very day Bear Stearns failed was the same day silver reached its multi-decade high of over $21 per ounce. We went on to say, "The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is because Bear Stearns was on the verge of being forced to cover their silver short position."

JP Morgan took over the concentrated short position in silver from Bear Stearns and gained complete control over the paper price of silver. Within weeks, JP Morgan was able to manipulate the price of silver down to below $9 per ounce. NIA believes they were able to drive the price of silver down through "naked short selling," selling paper silver that is unbacked by physical silver.

On February 5th, we witnessed another sharp decline in silver prices, which NIA described on February 7th as being "just a temporary wash out, before a huge surge in silver prices later in 2010." Since then, silver prices have rebounded by 18%. The temporary wash out that occurred on February 5th was predicted by independent metals trader Andrew Maguire, who came out this week exposing the fraud that is taking place in the paper silver market.

On February 3rd, Andrew Maguire wrote Eliud Ramirez, a senior investigator for the CFTC’s Enforcement Division, giving him the "heads up" for a "manipulative event" signaled for February 5th. He warned the CFTC that JP Morgan was about to manipulate down the price of silver after the release of non-farm payroll data on February 5th.…
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Why We are Susceptible to Manipulation

Why We are Susceptible to Manipulation

Times Square Collage

Courtesy of Washington’s Blog 

Biologists and sociologists tell us that our brains evolved in small groups or tribes.

As one example of how profoundly the small-group environment affected our brains, Daily Galaxy points out:

Research shows that one of the most powerful ways to stimulate more buying is celebrity endorsement. Neurologists at Erasmus University in Rotterdam report that our ability to weigh desirability and value doesn’t function normally if an item is endorsed by a well-known face. This lights up the brain’s dorsal claudate nucleus, which is involved in trust and learning. Areas linked to longer-term memory storage also fire up. Our minds overidentify with celebrities because we evolved in small tribes. If you knew someone, then they knew you. If you didn’t attack each other, you were probably pals.

Our minds still work this way, giving us the idea that the celebs we keep seeing are our acquaintances. And we want to be like them, because we’ve evolved to hate being out of the in-crowd. Brain scans show that social rejection activates brain areas that generate physical pain, probably because in prehistory tribal exclusion was tantamount to a death sentence. And scans by the National Institute of Mental Health show that when we feel socially inferior, two brain regions become more active: the insula and the ventral striatum. The insula is involved with the gut-sinking sensation you get when you feel that small. The ventral striatum is linked to motivation and reward. 

In small groups, we knew everyone extremely well. No one could really fool us about what type of person they were, because we had grown up interacting with them for our whole lives.

If a tribe member dressed up and pretended he was from another tribe, we would see it in a heart-beat. It would be like seeing your father in a costume: you would recognize him pretty quickly, wouldn’t you.

As the celebrity example shows, our brains can easily be fooled by people in our large modern society when we incorrectly ascribe to them the role of being someone we should trust.

As the celebrity example shows, our brains can easily be fooled by people in our large modern…
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Personal correspondence with Phil regarding how oil speculation affects oil prices.

Personal correspondence with Phil regarding how oil speculation affects oil prices.

Man moving drums in warehouse with forklift

Phil to Ilene:

This is a complicated issue as it’s not just the act of creating a contract.

Let’s say there are 100,000 barrels of oil in the world and 10 are sold each day and they are shipped from various places in various amounts but generally there are, at any given time, 30 days of oil at sea (300 barrels).  If I am taking straight delivery, I would contract with the producers to deliver me 1 barrel of oil per day for a year or 5 years or whatever for $50 a barrel.  My interest is to have a steady supply and the producers interest is to have a steady demand.  He wants to charge as much as possible, I want to pay as little as possible.

Enter the speculators.  Rather than me (the actual user) haggling with the producer directly (as is done in most business transactions), the speculator steps in and offers to buy as much oil as the guy can produce for $40.  I can’t do that because I only need one barrel a day but if the guy can make 1.3 or 1.6 barrels a day or he can add a new pump and make 2 barrels a day, knowing he has a buyer at $40, he will be thrilled (assuming the profits work selling 2Bpd at $80 vs 1Bpd at $50).
In a perfect world, the speculator is simply taking on some risk and will make the difference between the $40 they are paying and the $50 I am willing to pay and they will sell the excess for $40-50 and make a nice overall profit.

But then the speculators get greedy.  They know I NEED 1 barrel per day and perhaps there was some seasonality to pricing or natural fluctuation but all the speculator has to do is wait for the price to rise and then hold it there.  If supply is uneven, they can divert some to storage.  They are still buying it, creating demand but they are not delivering it so there is suddenly a “shortage” where none existed before.   As they accumulate more barrels in storage (say 100) they realize that getting the price up to $60 makes them not only $10 a day more per barrel they sell me,…
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A Reader Asks “How Did 558,000 People Lose Their Jobs When Only 190,000 Jobs Were Lost?”

A Reader Asks "How Did 558,000 People Lose Their Jobs When Only 190,000 Jobs Were Lost?"

Courtesy of Jesse’s Café Américain

Obama Here is an excerpt from today’s Bureau of Labor Statistics Non-farm Payrolls report.

"The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade.

Household Survey Data

In October, the number of unemployed persons increased by 558,000 to 15.7 million. The unemployment rate rose by 0.4 percentage point to 10.2 percent, the highest rate since April 1983. Since the start of the recession in December 2007, the number of unemployed persons has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points…

The civilian labor force participation rate was little changed over the month at 65.1 percent. The employment-population ratio continued to decline in October, falling to 58.5 percent."

An astute reader noticed that the BLS press release says that 190,000 jobs were lost from payroll employment, but the number of unemployed persons increased by 558,000. What’s up with that?

The BLS report consists of two independent data samples. BLS has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey.

There is the "Establishment Survey" which is based on responses from a sample of about 400,000 business establishments, about one-third of total nonfarm payroll employment. The headline payroll number, the job loss of 190,000, is based on this data.

Then there is the "Household Survey" which is a statistical survey of more than 50,000 households with regard to the employment circumstances of their members, which is then applied to the estimates of the US population to obtain the unemployment number. This survey was started in the 1950′s and is conducted by the Census Bureau with the data being provided to BLS. It is from the household survey that more detailed information is obtained about employment statistics within population groups like gender and age, wages, and hours worked. It is this study that is responsible for the unemployment rate of 10.2%.

So which survey is correct? Neither. The truth is somewhere


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Wonderland Markets: Part I and II

Here’s the long answer to a question regarding Phil’s thoughts on which way the market is going. – Ilene

Wonderland Market 

The Queen of Hearts, 1999 (oil on canvas)

By Phil at Phil’s Stock World (in comments)  

Market direction – Interesting that this is what’s on your minds as it’s what’s on my mind too.   What is real and what is not?  Keep in mind that when the market was down 50% in March, that was not real either.  You can go back and read all my posts back then, but the gist of my arguement was, short of annihilating a good portion of the global population, the global GDP is very unlikely to fall below $40Tn (down 20%) so anything beyond that is, by definition, an overreaction. 

On the other hand, the run up to S&P 1,500 was itself overdone as we can’t just keep expanding insanely forever (outside of inflationary expansion).  There’s an interesting article in Scientific American this week asking if current economic assumptions inherently violate the laws of physics, something I used to rant about back in ‘07 but got bored with as the market went up and up anyway – despite my efforts to talk sense to it…  Oddly the chairman at Utah State is feeling my pain already, saying: ""Of course I’m trying to send a message - I just don’t expect there’s anyone out there to receive it." 

So we have a low that was too low coming off a high that was too high.  We have MASSIVE government stimulus and I not only don’t use the word MASSIVE lightly but MASSIVE is wholly inadequate to describe the level of stimulus in comparison to anything that has ever happened in the history of the world.  We have a runaway global money supply, the worst global unemployment since the great depression (and that didn’t end in 12 months you know) and pretend shortages of commodities, which is usually something that ENDS expansion, not kicks it off.  We have a dellusional population where 60% of the people surveyed believe their home prices have appreciated over the past 12 months while anyone who read this week’s housing reports can see that there is virtually not a single zip code in the united states that hasn’t lost 10%…

To say the media is uncritical is like saying my mom doesn’t think I suck.  This is not surprising when you consider…
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Phil's Favorites

Kurds targeted in Turkish attack include thousands of female fighters who battled Islamic State

 

Kurds targeted in Turkish attack include thousands of female fighters who battled Islamic State

Courtesy of Haidar Khezri, University of Central Florida

Kurdish fighters under attack by Turkey have described President Donald Trump’s decision to withdraw U.S. troops from northern Syria as a “stab in the back.”

Since bombing began on Oct. 9, Turkish military operations against the Syrian Democratic Forces in northern Syria, Washington’s staunchest and most effective allies in the war against the Islamic State, has killed at least 11 civilians...



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Zero Hedge

Uber & Out: Ride-Hailing Firms Lays Off Another 350 Staff

Courtesy of ZeroHedge

In the third round of layoffs since its IPO (and post-IPO share price plunge), Uber CEO Dara Khosrowshahi announced the job cuts in a company-wide email this morning.

Khosrowshahi told staff that around 350 employees across several teams within the organization, including Uber Eats, will be laid off.

All of this comes about one month after Uber laid off 435 employees across its product and engineering teams and less than three months after Uber laid off about 400 people from its marketing team. At this point, most departments at Uber have been affected by layoffs.

One wonders if, like the...



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Insider Scoop

'Wait For A Better Entry Point': Datadog Analysts Initiate Coverage Following IPO

Courtesy of Benzinga

Datadog Inc (NASDAQ: DDOG) shares got off to a hot start on the public market following the company’s IPO in September. After pricing its IPO at $27 per share, Datadog jumped nearly 50% on its first day of trading and has held onto most of those gains in the stock’s first month of trading.

This week, investors get their first taste of what Datadog underwriter...



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Kimble Charting Solutions

New Gold Bull Market? Not Until This Happens!

Courtesy of Chris Kimble

After a big summer rally, Gold peaked out at $1566/oz in September.

Since then, Gold prices have been consolidating between $1475 and $1550.

So what’s happening here? Enter the Swiss Franc currency…

In today’s chart, we look at a key indicator (and correlation) for Gold. As you can see, the Swiss Franc has an uncanny resemblance to Gold.

Both Gold and the Franc are testing heavy resistance at the same time.

Until both breakout at (2), odds are low that a new Gold bull market emerges with another big rally leg higher....



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The Technical Traders

Lots of Upside Ahead for the Metals and Miners

Courtesy of Technical Traders

Palisade Radio talks with Chris as he discusses his approach to trading and why technical analysis works for him. He focuses on the chart and price action and explains why investors need to follow a trading strategy that suits their personality.

He cautions that a broad sell-off is likely when stocks move into the next bear market. This liquidation will pull everything down, including gold, for a time. Afterward, he anticipates a massive rally in the juniors.

Time Stamp References:

...



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Chart School

US Economic Review 2019Q4

Courtesy of Read the Ticker

An investor must form an opinion of the wider economic risk, here is a small sample of readtheticker.com US economy review.


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Example of the first chart in the video.


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Fundamentals are important, and so is market timing, here at readtheticker.com we believe a combination of ...

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Digital Currencies

Zuck Delays Libra Launch Date Due To Issues "Sensitive To Society"

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Facebook is taking a much more careful approach to Libra than its previous projects, CEO Mark Zuckerberg has confirmed. 

“Obviously we want to move forward at some point soon [and] not have this take many years to roll out,” he said. “But ...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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